Hi coffeezoo. Yeah, I've done a bit of digging in my day. I guess it's like someone wanting to get from NYC to LA. I probably won't find a person on the planet who'd be able to tell me precisely the exact vector (mileage and direction) to hit it squarely from 3000 miles away. But somewhere between that ideal and finding 12 million people who could tell me to "head west and then check again in a few miles" (rather than "head north" or just flip a coin or consult imaginary beings) there's a bit more knowledge, adjustment, perception, feedback, knowledge, readjustment, and so forth to actually get me to the west coast based on accurate perception of where I am, where I want to go, and having some means to get there that actually works. That all people make mistakes, that we're neither omniscient nor omnipotent (and never will be), doesn't invalidate the fact that one has to trade what is real and one has to pick entries, exits, and manage our own trading account within the rules of reality. Yeah, we might make mistakes, but the opposite of at least trying to conform our decisions to what's real is a formula for getting wiped out--as anyone who's traded their illusions long-term quickly finds out. Case in point, a very sad story posted recently on a tax thread. The guy blew out a quarter million+ in the last 9 months because he kept shorting "the pullback" in the S&P. Of course, one can't fault him for perseverance, but that alone isn't enough. If you know of an alternative to doing our best to perceive things accurately and then making informed decisions based on what we objectively observe and have integrated with everything else that we know (such as the reality of our tax friend's capital reserves and the effect of margined positions if a trade with size continues to move against us), I would be interested in learning what you've found that works better. So I guess to directly answer your comment, I'd say in rebuttal and in complete opposition to your premise, that we ALL have that ability! And like other abilities that are learned, some use it, some don't, some use it when it suits them, some guard it and improve on it. It is the nature of human beings to think. That IS our greatest asset. Cheers.
Be Humble: 1) Don't fight trends 2) The markets always right 3) Average up (scale in) , don't "ride" winners too long (they do run out of gas)...take profits regularly 4) All cash (not trading) IS a position. 5) Always have a portion of your trading account in cash. 6) Be satisfied with being profitable...make your profits day by day, the phenominal plays only come once in a while. Good Luck
Rgelite, thank u for taking the time to type such a lengthy response but I don't feel like continuing this discussion.
No problem at all. I write for myself. If others find value in it, it's through my generosity which is reward in itself. Thank you for giving me the opportunity to formulate, structure, and post a response. I had fun.
The main quality of successful traders that distinguishes them is that they simply work much harder and focus much more intently on market information than unsuccessful ones. The classic example for me is Buffett, who when he was starting in the 50s knew the financials (P&L, balance sheet) and business fundamentals of every single stock in the USA. That is the level you should aim for if you want to really make it big. I am lazier and less ambitious so I am content to trade a good position size as long as I think I have a significant advantage over the majority of market players in the asset in question. I don't need to know everything, I just need to know something important that is not yet recognised by the market, and which will be recognised in the nearish future. You should always remember that every trade you do has someone else on the other side. A lot of the time it will be someone who knows that stock or asset far more thoroughly than you. Even if it's some micro cap, how do you know you aren't trading with some stock geek who's researched this thing to kingdom come? On balance he is going to whip your ass. Another classic statistic is Peter Lynch spending $10 million+ per year just to hire industry experts (e.g. he would hire ex-widget CEOs for advice if he wanted to buy a widget-making stock) to get to grips with industry fundamentals. Do you think you are going to out-research this guy on industry factors? So my advice is to become expert on something. It doesn't have to be a stock, or a sector - it could be becoming expert on bull or bear markets, or trading news releases, or volatility trading, or emerging market currency shocks, or illiquid markets. Really become au fait with your speciality, and then you will have the experience and confidence to know when you *can* take on the Buffetts and Lynches and other bigshots and whup their arse - as long as it is on your home turf. No one on ET would stick a chance playing Michael Jordan at basketball, even if he gave them a huge handicap. But if you played poker or challenged him to some hot laps in a racing car, and you knew that stuff, you would massacre him. That is what you should look for in trading.
I disagree with this piece of conventional wisdom. As a counter-example, my primary trading system tends to take profits a bit too early and lets losers run a bit too long. Its biggest losers tend to be about four times as large as its biggest winners. However, it wins or breaks even on about 70% of its trades, makes a profit four days out of five, and is net profitable with reasonable drawdowns. If you're a system trader like I am, here's my three-point secret to success: 1 - "Everything that can be tested must be tested." -- Victor Niederhoffer 2 - "Make sure that your results are statistically significant (ie. not based on too few trades)" -- loosely paraphrased from Keith Fitschen 3 - Have the courage to commit money to your system, and the discipline to follow it faithfully.